The Ideal Home Buyer Will Be A Renter

The ideal home buyer now — in a reverse of what was true for years — is a renter who is not burdened with a house. Such a buyer will need a down payment from somewhere, and he or she will need enough income to meet the monthly payments for the foreseeable future, including any increase in adjustable rates that seems probable.

But not owning a home, which may be hard to sell, is a big plus.

A year ago, having a home that had appreciated in value meant that an owner could trade up to a more expensive home. Now it means that the homeowner cannot move until the old home is sold, and that is getting more difficult.

First, the seller has to find a buyer who can get a mortgage. Second, the price has to be high enough to pay off the old mortgage and leave enough cash for the down payment on a new home. Both were taken for granted a year ago. In many markets, neither is a sure thing now.

The Chain: Selling one house depends on the buyer’s selling another house, and that deal in turn depends on yet another sale, and so on and so on.

Indeed that's what we are seeing as the first time buyers affordability has plummeted down. At the moment the housing market is on thin ice, cracks have appeared and further evidence show that we are at a crucial time.

Therefore the real estate market is a place to avoid for the short to medium term at least until the chain is broken...